The Impacts of the New Zealand Emissions Trading Scheme on Economic and Environmental Factors

Abstract

New Zealand implemented an emissions trading scheme, the NZ ETS, to regulate the production of Greenhouse Gases. This ETS is the first of its kind to include the agricultural sector, as is expected to significantly raise costs to both producers and consumers. The aim of the paper is to assess the potential impact of the New Zealand ETS on the economy and the environment. The paper reports first on the development and nature of the legislation itself, and then continues by mapping the cost of the ETS on producers, and then furthermore the transfer of these costs as increased prices. Then by utilising the Lincoln Trade and Environment Model, or LTEM, a partial equilibrium model which forecasts international trade and domestic production and consumption of agricultural commodities, a number of scenarios revolving around the NZ ETS are projected. The paper finally presents the results gathered from the LTEM, showing the impact of the NZ ETS on both the production of agricultural commodities, and the production of GHGs by the industry. These results demonstrate the potential cost of the NZ ETS on the agricultural sector, and its ability to reduce emissions